David R. Henderson  

Tullock on Advertising

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I'm at a Liberty Fund conference on bureaucracy in Brunswick, Maine and I found an interesting passage in one of the readings, Gordon Tullock's The Politics of Bureaucracy. It's an aside on advertising. Tullock writes:

Due to the ubiquitousness of advertising in modern life, we sometimes overestimate its importance. It may be forgotten that the method is important to business firms only when products advertised are almost identical in quality. "There ain't no difference in soap," and hence the soap company with the biggest campaign sells the most soap. But shortly after World War II there was a difference in soaps; the detergents were introduced. At that time none of the old companies, experienced and skilled in advertising techniques, tried for long to sell old-fashioned soap in competition with the new detergents.

The last two lines are reminiscent of Joseph Schumpeter's "creative destruction."


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CATEGORIES: Business Economics



COMMENTS (3 to date)
AT writes:

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There is a much better vindication of Tullock's work on display on cable television (and You Tube) right now; the George Zimmerman trial. In which, the prosecution brings witness after witness to the stand, all of whom support the defense's argument that Zimmerman acted in self-defense.

It's hard to imagine that the prosecutor doesn't see this, nor the judge. The initial prosecutor declined to charge Zimmerman for exactly the reasons being made painfully obvious to viewers. But that decision was met with a barrage of racially motivated venom. Clearly the decision to put this show trial on was to avoid more of that. Another case of the incentives facing government employees being exactly counter to what is rational from the point of view of the taxpayers.

Just as The Calculus of Consent predicts.

Tom West writes:

It may be forgotten that the method is important to business firms only when products advertised are almost identical in quality.

"almost identical"? I have to say in my experience it takes a *huge* difference in quality to make advertising irrelevant.

Being perceived as current market leader is probably more important than any other factor, but advertising is fundamental to maintaining that impression.

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